4 ms·

Actually as a CEO he has a fiduciary duty to maximise shareholder value.

by zmk_ 8y ago

ceejayoz 8y ago
In the long-term. "Fuck off, I know what I'm doing, and I'm not chasing short-term single quarter results" can easily be fulfilling that duty.
- Thriptic 8y ago
  It certainly works for Amazon
scottmf 8y ago
Doesn’t he have a duty to be honest to shareholders?
xkjkls 8y ago
That's not entirely true. He has duties to run the company in with good faith and care, but not necessarily to maximize shareholder value.
- garmaine 8y ago
  ‘Good faith and care’ is typically understood by US courts to have a strong emphasis on ROI. But you’re right, it is a little bit of gray area, and can be made purposefully more complicated when, e.g., the prospectus puts other duties first. Google’s “we’re not a typical company and we don’t intend to become one” is a famous example. For benefit corporations are the extreme example of this.
  - xkjkls 8y ago
    Almost all lawsuits regarding the good faith clause involve some sort of corrupt practice that enriched the executives at the expense of the shareholders (in fact, Tesla is currently involved in a similar lawsuit regarding its purchase of Solar City). It would be near impossible to prove bad faith in choosing one business strategy vs. another if there wasn't some corrupt intent or incentive.
    - garmaine 8y ago
      If Tim Cook donated Apple’s cash reserves entirely to charity, or made decisions purposefully wrecking the finances of the company for the lulz, I guarantee there would be a successful shareholder lawsuits. This just doesn’t happen as often. But here have been claims of material harm due to gross negligence before. There are aspects of th Enron case that come to mind, and BP’s shareholder lawsuit after the deepwater horizon disaster.
      - xkjkls 8y ago
        Apple donating huge amounts to cash to charity would be an... interesting... lawsuit. I agree that they would definitely get sued over it, but I don't believe that they outcome of that lawsuit is necessarily cut and dry. And the cases you bring up for fraud/negligence are very different, and pretty obviously not covered under running an enterprise in good faith.
garmaine 8y ago
I’m not sure why you are down voted... that is his legal obligation.
- ceejayoz 8y ago
  That's a commonly held myth. https://www.nytimes.com/roomfordebate/2015/04/16/what-are-corporations-obligations-to-shareholders/corporations-dont-have-to-maximize-profits https://www.nytimes.com/roomfordebate/2015/04/16/what-are-co... https://www.washingtonpost.com/news/wonk/wp/2013/09/09/how-the-cult-of-shareholder-value-wrecked-american-business/ https://www.washingtonpost.com/news/wonk/wp/2013/09/09/how-t... https://medium.com/bull-market/there-is-no-effective-fiduciary-duty-to-maximize-profits-939ae50d0572 https://medium.com/bull-market/there-is-no-effective-fiducia... https://en.wikipedia.org/wiki/Fiduciary#Fiduciary_duties_under_Delaware_corporate_law https://en.wikipedia.org/wiki/Fiduciary#Fiduciary_duties_und...
- Clubber 8y ago
  It is not. It's what psychopath people use as an excuse.
Luc 8y ago
Not at all true in the US. See: Supreme Court Hobby Lobby case.
Clubber 8y ago
That isn't true. https://www.nytimes.com/roomfordebate/2015/04/16/what-are-corporations-obligations-to-shareholders/corporations-dont-have-to-maximize-profits https://www.nytimes.com/roomfordebate/2015/04/16/what-are-co...
matwood 8y ago
> fiduciary duty to maximise shareholder value This can be and has been widely interpreted. It does not have to mean maximizing profits to the exclusion of everything else.
- gnode 8y ago
  Or more relevantly to this situation: chasing quarterly financial results to the detriment of long-term growth and profitability.
stvswn 8y ago
A lot of people are downvoting, I think, because they believe that you are representing that this is the state of the law, when it's really not so cut and dry. I think one could say that one's "duty" is more about what is ethically required, however. I tend to think that, ethically, a CEO is required to maximize shareholder value. This doesn't mean that he needs to agree with shareholders about what that means, necessarily, and trading off short-term value for long-term value could be the right call. I feel like sometimes "caring only about shareholder profits" is some kind of code for being greedy, when I think it's quite the opposite -- it's much greedier to spend your company's money for your own vanity, or to set up your next job, or to do favors for friends -- often the non-profit-maximizing activities a CEO engages in falls into one of these buckets. It is also completely reasonable to say that it is in the shareholders' best interests that their company act ethically, and in accordance with the law.

Actually as a CEO he has a fiduciary duty to maximise shareholder value.

by zmk_ 8y ago

Actually as a CEO he has a fiduciary duty to maximise shareholder value.

In the long-term. "Fuck off, I know what I'm doing, and I'm not chasing short-term single quarter results" can easily be fulfilling that duty.

Thriptic 8y ago
It certainly works for Amazon

scottmf 8y ago

Doesn’t he have a duty to be honest to shareholders?

xkjkls 8y ago

That's not entirely true. He has duties to run the company in with good faith and care, but not necessarily to maximize shareholder value.

garmaine 8y ago
‘Good faith and care’ is typically understood by US courts to have a strong emphasis on ROI. But you’re right, it is a little bit of gray area, and can be made purposefully more complicated when, e.g., the prospectus puts other duties first. Google’s “we’re not a typical company and we don’t intend to become one” is a famous example. For benefit corporations are the extreme example of this.
- xkjkls 8y ago
  Almost all lawsuits regarding the good faith clause involve some sort of corrupt practice that enriched the executives at the expense of the shareholders (in fact, Tesla is currently involved in a similar lawsuit regarding its purchase of Solar City). It would be near impossible to prove bad faith in choosing one business strategy vs. another if there wasn't some corrupt intent or incentive.
  - garmaine 8y ago
    If Tim Cook donated Apple’s cash reserves entirely to charity, or made decisions purposefully wrecking the finances of the company for the lulz, I guarantee there would be a successful shareholder lawsuits. This just doesn’t happen as often. But here have been claims of material harm due to gross negligence before. There are aspects of th Enron case that come to mind, and BP’s shareholder lawsuit after the deepwater horizon disaster.
    - xkjkls 8y ago
      Apple donating huge amounts to cash to charity would be an... interesting... lawsuit. I agree that they would definitely get sued over it, but I don't believe that they outcome of that lawsuit is necessarily cut and dry. And the cases you bring up for fraud/negligence are very different, and pretty obviously not covered under running an enterprise in good faith.

garmaine 8y ago

I’m not sure why you are down voted... that is his legal obligation.

ceejayoz 8y ago
That's a commonly held myth. https://www.nytimes.com/roomfordebate/2015/04/16/what-are-corporations-obligations-to-shareholders/corporations-dont-have-to-maximize-profits https://www.nytimes.com/roomfordebate/2015/04/16/what-are-co... https://www.washingtonpost.com/news/wonk/wp/2013/09/09/how-the-cult-of-shareholder-value-wrecked-american-business/ https://www.washingtonpost.com/news/wonk/wp/2013/09/09/how-t... https://medium.com/bull-market/there-is-no-effective-fiduciary-duty-to-maximize-profits-939ae50d0572 https://medium.com/bull-market/there-is-no-effective-fiducia... https://en.wikipedia.org/wiki/Fiduciary#Fiduciary_duties_under_Delaware_corporate_law https://en.wikipedia.org/wiki/Fiduciary#Fiduciary_duties_und...
Clubber 8y ago
It is not. It's what psychopath people use as an excuse.

Luc 8y ago

Not at all true in the US. See: Supreme Court Hobby Lobby case.

Clubber 8y ago

That isn't true. https://www.nytimes.com/roomfordebate/2015/04/16/what-are-corporations-obligations-to-shareholders/corporations-dont-have-to-maximize-profits https://www.nytimes.com/roomfordebate/2015/04/16/what-are-co...

matwood 8y ago

> fiduciary duty to maximise shareholder value This can be and has been widely interpreted. It does not have to mean maximizing profits to the exclusion of everything else.

gnode 8y ago
Or more relevantly to this situation: chasing quarterly financial results to the detriment of long-term growth and profitability.

stvswn 8y ago

A lot of people are downvoting, I think, because they believe that you are representing that this is the state of the law, when it's really not so cut and dry. I think one could say that one's "duty" is more about what is ethically required, however. I tend to think that, ethically, a CEO is required to maximize shareholder value. This doesn't mean that he needs to agree with shareholders about what that means, necessarily, and trading off short-term value for long-term value could be the right call. I feel like sometimes "caring only about shareholder profits" is some kind of code for being greedy, when I think it's quite the opposite -- it's much greedier to spend your company's money for your own vanity, or to set up your next job, or to do favors for friends -- often the non-profit-maximizing activities a CEO engages in falls into one of these buckets. It is also completely reasonable to say that it is in the shareholders' best interests that their company act ethically, and in accordance with the law.